While the performance of active managers varied across fund categories, 88 per cent of active Indian large-cap funds underperformed the S&P BSE 100 in 2022, against 45 per cent for bond funds, the S&P Dow Jones Indices said in a report.
Its annual SPIVA India Scorecard measured the performance of Indian equity and bond mutual funds vis-a-vis their respective benchmark indices over one, three, five, and 10-year horizons based on data from S&P Dow Jones and Morningstar.
The research highlights that 87.5 per cent of active large-cap funds could not beat the 6.0 per cent gain of S&P BSE 100 in 2022. The underperformance rates were high in the three- and five-year periods at 96.7 per cent and 93.8 per cent, respectively. However, it was better in the 10-year period at 67.9 per cent.
In the case of equity-linked savings scheme (ELSS) funds, 76.9 per cent of funds underperformed versus the 5.7 per cent gain for S&P BSE 200 in 2022. Here again, the underperformance rate was better in the 10-year period at 63.9 per cent.
The report said: “Indian ELSS funds achieved the second-highest long-term survival rate across all categories, with 77.8 per cent still surviving after 10 years.”
Mid- and Small-Cap Funds
Nearly 55 per cent of active equity mid-small-cap funds underperformed the S&P BSE 400 MidSmallCap Index, which rose 2.2 per cent in 2022.
The researchers noted that the Indian equity mid-small-cap funds fared the best among all the categories in the study by far, with 50.0 per cent of them beating the S&P BSE 400 MidSmallCap Index in the 10-year period ending December 2022.
Government Bond Funds
The situation was no different in the bond segment. The active bond funds saw an underperformance rate of 68.0 per cent compared to a 2.8 per cent gain for the S&P BSE India Government Bond Index in 2022. Less than one-third of active funds could beat their benchmarks. The underperformance rate over three, five and 10-year periods were 70.8 per cent, 71.1 per cent, and 83.0 per cent, respectively.
“The 2022 underperformance of Indian Composite Bond fund managers was the lowest across all categories, at just 45.4 per cent,” it said.
However, over the 10-year period, 98.2 per cent of these funds failed to beat their benchmark, the highest underperformance rate across categories.
Despite strong headwinds such as volatile commodity prices, inflationary pressures and the weakening of the rupee against the US dollar in 2022, Indian markets could weather the storm remarkably well than most of its peers. The report highlights that headline equity and fixed income benchmark indices could stage a remarkable recovery in the second half of 2022 after falling in the first half.
In addition, 2022 saw both corporate winners and losers amid rising interest rates and a turbulent market environment. Smaller firms were the hardest hit by the government’s monetary tightening policy. The S&P BSE 400 MidSmallCap Index underperformed the S&P BSE 200 by 4 per cent, the biggest drop since 2019.
